The Return Trends At Intellect Design Arena (NSE:INTELLECT) Look Promising

To find a multi-bagger stock, what are the underlying trends we should look for in a business? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Intellect Design Arena's (NSE:INTELLECT) returns on capital, so let's have a look.

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What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Intellect Design Arena, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.13 = ₹3.7b ÷ (₹39b - ₹9.5b) (Based on the trailing twelve months to March 2025).

Therefore, Intellect Design Arena has an ROCE of 13%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Software industry average of 12%.

Check out our latest analysis for Intellect Design Arena

Above you can see how the current ROCE for Intellect Design Arena compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Intellect Design Arena .

What Can We Tell From Intellect Design Arena's ROCE Trend?

We like the trends that we're seeing from Intellect Design Arena. The data shows that returns on capital have increased substantially over the last five years to 13%. Basically the business is earning more per dollar of capital invested and in addition to that, 157% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 24%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

In Conclusion...

All in all, it's terrific to see that Intellect Design Arena is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Intellect Design Arena can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 1 warning sign with Intellect Design Arena and understanding this should be part of your investment process.

While Intellect Design Arena isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.